Industrial policy and the ground reality
Fiscal and
non-fiscal
incentives
have to be
redistributed
subject to real need assessment
of all industries
AKM Asaduzzaman Patwary
In the line with achieving sustainable economic development, the proposed Industrial Policy 2015 has been drafted to encourage labour intensive SME industries as well as the private sector. The objectives of the Industry Policy are to increase the industry GDP contribution to 40 per cent from 29 per cent whereas manufacturing growth be increased to 25 per cent from 18 per cent, employment generation and inclusive economic growth for vision 2021. The objectives also include encouraging the import substitute and diversified export oriented industrialisation as well as specialised industries in Bangladesh, enhancing women engagement in the industrial employment of Bangladesh and facilitating the FDI.
A number of courses of action have been considered in the policy. Pro-industry infrastructure is being prepared and developed to achieve the vision of industrial policy. The authorities should design time-bound implementation measures on priority, provide cash incentives for small cottage industries and non-traditional sectors for export-led growth. The industrial growth needs to be streamlined with increasing export competiveness and increasing the women engagement in the local industrial process.
The following observations will help to portray the anomalies, inconsistencies noticed in the five-year plan of GoB:
The course of actions is not well-defined.
The industry definition needs to be enormously re-defined and realistic. The policy is not competitive enough to support the massive and diversified industrial growth of Bangladesh.
The policy has not ensured any pro-micro and SME industries ambience.
The other policies of government are not commensurate with industrial policy achievement targets.
The cost of capital for the SME business start-up is beyond affordability.
Export earning target seems unplanned and inconsistent; the vision 2021 initially targeted $80 billion which later changed to $54 billion in Seventh Five Year Plan by 2020.
The industry policy does not have any focused and clear initiatives to minimize and lower the disparity between EPZs and non EPZs industries in Bangladesh as policy fails largely to ensure equality within two segments of industries as the non-EPZs are the prime movers of our economy.
The fiscal management does not fully allocate required fund and reflect the ultimate objective of the industrial policy and vision in the yearly budget.
Rather than envisaging all sectors in one basket, manageable number of industries needs to be taken care of instead of highlighting all cross-sectors to cover under the umbrella of industrial policy.
The policy needs to be very analytical, focused, visionary and globally competitive so that our industry can outweigh other competitive economies.
The spirit of industrial policy and long-term vision, five-year plan and SDG visions especially Goal 9 for sustainable and environment friendly industrialisation dont match fully as the difference in characteristics, objective are evident largely.
Investment in thrust sectors and high priority sectors are slimming down due to other exogenous economic factors which require coordination.
Rational budgetary allocation and investment has to be made between public and private sector industries. Higher investment in sick public sector triggers budget deficit and economic slowdown as privatisation commission specialized at transforming business has grossly failed in several occasions to function well which result into merger of privatization with other organization. Budget pipeline should be rational and strategic and target driven not at the cost of other potential sectors in Bangladesh. Energy and power and other utility supply have to be substantial to promote huge local and foreign private sector industrial investment as priority and high potential sectors are ship building, pharmaceuticals, automotive, light engineering, agriculture, backward linkage of textile, jute, leather, footwear and ITES business.
Failure of attracting investment by BOI in Bangladesh has led to rethink the renovation and redevelopment of BOI mode of operation.
Industrial policy should determine its clear jurisdiction; fisheries and livestock industries should be under the purview of fishers and livestock, their development matters should not be directed by ministry of industries for the convenience and greater interest of that specialized sector.
Jute and textile industry development should be under the purview of their ministry rather than partial contribution by jute and textile and industries.
Backward linkage industry build strong footing of industries of high priority sectors in Bangladesh facilitating import substitute industries to head towards a stable economic state. Bangladesh has got substantial potential and remarkable base of backward linkage industry of some exportable products which require to be catered until reaching stability.
The industry policy lacks coordination with other agencies of government. As a result the policy, to a large extent, fails in implementation process. The policy needs to focus and put together the interest of diverse stakeholder groups like bank, insurance, infrastructure agency, BOI, ministry of planning, commerce apart from representatives from different industries so that an acceptable and shared and realistically focused policy can be shaped.
EPZ manufacturers should increase their sale volume to local market over 20 percent and specialized economic zone allocation, Investment and development policy need to be timely.
Research and development capacity building is inevitable in order to looking after various avenues, aspects of industrialisation growth prospect, analysis of trend and other avenues giving thought-provoking inputs in the policy formulation. Research and innovation investment is essential for progressive industrial growth, world leading MNEs and TNCs allocate 60 percent of budget in RD.
Fiscal and non-fiscal incentives have to be redistributed subject to real need assessment of all industries rather than giving same treatment to all to cut unnecessary financial burden to the economy.
A national coordination and development committee has to be put in place to monitor and oversee the entire function of the industrialisation and address instantly any concern and problems.
In some instances, the policy made defied the interest of private sector industrial growth as unilateral policy as balance and winning combination has to be drawn between the public and private sector for cumulative interest of the industrialisation in Bangladesh.
A good policy proves useful and effectual once it is made by SMART (Specific, Measurable, Achievable, Realistic and Time-bound) plan. It has been the heritage that policy never gets implemented due to lack of evident coordination and cohesion of government agencies involved in the greater history of conventional bureaucracy. Drafting and enacting a policy is not enough unless it is mobilized by aggressive movers and shakers, policy advisers, proactive implementers under the fervent, passionate leadership.
Addressing the aforesaid observations and efficient endeavours are likely to improvise and strengthen the policy and industrial environment of Bangladesh to a large extent. Being critical to industrial policy is logical and important for reequipping our industrial base stronger, inclusive and sustainable aligned with socio economic vision of Bangladesh.
The idealism of the globalization, act locally think globally has changed into act and think globally in the current times. This philosophy needs to be borne in mind and plans should be made accordingly.
The writer is Head of Research, Research Fellow, DCCI
